Assignment Task: Kambuna Ltd expects to manufacture and sell handbags and has the following information for 2019.
(1) Sales price of a handbag in January 2019 is $150 and is expected to increase by 10% in February and 15% in March.
(2) Product costs per unit:
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Direct material (2 metres @ $20)
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$40.00
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Direct labour (1.5 hour @ 10.00)
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$15.00
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Overheads
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$10.00
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$65.00
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(3) Budgeted sales for the first six month period are:
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Month
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Number of bags
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January
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20,000
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February
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22,000
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March
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18,000
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April
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30,000
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May
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26,000
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June
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30,000
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(4) Inventory policy and beginning inventory balances:
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Type
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Quantities
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Finished goods
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20 % of the handbags required for the next month's sales. Balance on 1 January 2019 is 5,000 handbags costing $300,000
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Direct materials
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40% of the materials required for the next month's sales. Balance on 1 January 2019 is 2,000 metres.
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Required:
a) Prepare a sales budget for the first quarter of 2019.
b) Prepare production budgets in units for the first quarter of 2019.
c) Prepare a purchases budget in metres for the first quarter of 2019, giving total purchases in both metres and dollars for each month.
d) Prepare a direct labour budget for the first quarter of 2019.
e) Calculate the budgeted income statement up to gross profit, for the first quarter 2019.
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